Here is an estimate of the closing costs on a 95% Loan-to-Value loan and a thirty-year fixed rate mortgage on the median home price in the United States:
- Median home price: $227,000
- Down payment (5%): $11,350
- Closing costs (2%-3%): $4,900
- Mortgage amount: $222,450
The closing costs will be quite substantial, and these will likely include the following:
Table 11.1. Closing Costs
You may also be asked to pay for some other items at closing:
- Reimbursement of Oil: If your purchased home has oil heat, you will likely be asked to reimburse the seller for oil left in the oil tank.
- Prepayment of Insurance: The bank giving you the mortgage may ask you to pay at settlement the first six months of homeowners insurance, so they know, at least initially, that the home is insured.
- Reimbursement of Real Estate Taxes: If the seller has already paid all the real estate taxes for the year and there are, e.g., six months left in the tax year, you will have to reimburse the seller for six months of real estate taxes.
- State Transfer Tax: Some states have real estate transfer taxes, which are charged on home sales. As an example, the state of Pennsylvania has a 2% transfer tax on all home sales. One percent of this is paid by the buyer and 1% is paid by the seller.
You are entitled to a full good faith estimate of the closing costs at least a few days prior to closing on the house and closing on the mortgage. If you do not get one, ask for it.